How Well Do You Know Your Clients?

How well do you know your clients? Do you fully understand their needs and exposures? Knowing your clients is absolutely crucial to your ability to providing the insurance they require. In the world of E&O, your client knowledge could make a big difference in your claims experience.

You probably know your clients if you communicate with them regularly, make sure they understand their policies, and help them to identify exposures that aren’t currently covered. You might know clients who live in close proximity to your office quite well. However, if you simply mail out policies yearly, renewed as is, and don’t communicate in any other way, it surely would be hard to assert that you’ve kept up with knowing the needs of your customers.

Having out-of-state clients certainly adds to the challenge, but proper and periodic communication is still achievable. In the following example, the agent doesn’t appear to have realized the challenge — or the consequences — he faced:

A claim involved the failure of an agent to provide a computer manufacturer with Warehouse coverage. This particular agency, located in New York, specialized in writing Commercial package policies for computer manufacturers. The agent had met with the client at the client’s warehouse in California. Upon his return home, the agent provided the carrier with a binder and specification sheet. When the underwriter inquired whether there were a safe and a guard at the warehouse, the agent replied in the affirmative.

When a robbery involving the theft of a large amount of computer equipment occurred at the warehouse, the carrier paid the loss. They then asserted a claim against the agent for reimbursement on the basis that the security wasn’t as stated, so the risk shouldn’t have been accepted in the first place. The carrier won the case!

There’s no doubt that this claim could have been avoided. The agent didn’t go the extra, but necessary, mile to follow up with the client on the security question. He relied on his memory after a brief visit to the warehouse, instead of communicating with the client and requiring a documented response. The agent should have known to exercise special caution on issues involving a long-distance customer with complex coverages.

It’s not realistic to expect to know everything about your clients, but doing the proper job of protecting them means you must either have a client profile at your fingertips or the ability to get the right information when needed.

According to Utica National Insurance Co. statistics, failure to provide the proper coverage has been the No. 1 cause of E&O claims since the mid-1990s. Knowing your customers and doing what’s right by them certainly will alleviate many of these types of claims.